REG - First Derivatives - Preliminary results for the year ended 28 Feb 2018
RNS Number : 8036OFirst Derivatives PLC22 May 201822 May 2018
First Derivatives plc
("FD", the "Company" or the "Group")
Preliminary results for the year ended 28 February 2018
FD (AIM:FDP.L, ESM:FDP.I) today announces its results for the year ended 28 February 2018.
Financial Highlights
Revenue £186.0m (2017: £151.7m)
+23%
Adjusted EBITDA* £34.1m (2017: £28.8m)
+19%
Profit before tax £12.1m (2017: £12.5m)
-3%
Adjusted** profit after tax £19.5m (2017: £16.1m)
+21%
Adjusted** fully diluted EPS 72.2p (2017: 61.3p)
+18%
Full year dividend 24.0p per share (2017: 20.0p)
+20%
Net debt £16.2m (2017: £13.5m)
*Adjusted for share-based payments and acquisition costs
**Adjusted for amortisation of acquired intangibles, share-based payments, acquisition costs, foreign currency translation effect, share of loss of associate and exceptional taxation
Business Highlights
- Strong growth in software revenue, up 27% as a result of new contract wins and continued penetration of the existing customer base
- Strategic progression in our managed services and consulting activities resulting in revenue growth of 17%
- The implementation and ongoing support of a third-party system for a New York-based bank, representing one of the largest contracts in our history
- FinTech revenue up 22% to £142.9m (2017: £117.4m), driven by growth in recurring software revenue and an expansion of services provided to clients
- MarTech revenue up 24% to £38.2m (2017: £30.7m), driven by growth in subscriptions for our Marketing Cloud platform, powered by our Kx technology
- High-profile client wins including a Fortune 500 manufacturing company, a FTSE 100 gaming company and Aston Martin-Red Bull Racing, leading to inbound interest across a range of markets
- Continued investment across the Group, including machine learning and AI initiatives, to further penetrate our addressable market in software
- Boosted capabilities in telco, a key target market, through the acquisition of Telconomics
- Positive start to the current financial year, with a healthy pipeline of new business opportunities.
Seamus Keating, Chairman of FD, commented: "This has been another year where we have combined organic growth with selective investment in the business to realise the enormous market opportunity available to First Derivatives. Prompted by strong demand from our clients, we have continued to penetrate our markets enabling us to deliver our 21st consecutive year of double-digit revenue growth.
Our ability to capitalise on the investments we have made and the scale of our addressable software market provides us the potential for continued strong growth in future years. While we will continue to invest to stay at the forefront of our field, much has already been done to support our ambitious plans and our current structure is sufficient to achieve significant growth. Recognising that success always requires focus and effort, we nevertheless look to the future with confidence."
For further information, please contact:
First Derivatives plc
Brian Conlon, Chief Executive Officer
Graham Ferguson, Chief Financial Officer
Ian Mitchell, Head of Investor Relations
+44(0)28 3025 2242
Investec Bank plc
(Nominated Adviser and Broker)
Andrew Pinder
Carlton Nelson
Sebastian Lawrence
+44 (0)20 7597 5970
Goodbody (ESM Adviser and Broker)
Linda Hickey
Finbarr Griffin
+353 (0)1 667 0420
FTI Consulting
Matt Dixon
Dwight Burden
Darius Alexander
Niamh Fogarty
+44 (0)20 3727 1000
About FD
FD is a global technology provider with 20 years of experience working with some of the world's largest finance, technology, retail, pharma, manufacturing and energy institutions. The Group's Kx technology, incorporating the kdb+ time-series database, is a leader in high-performance, in-memory computing, streaming analytics and operational intelligence. Kx delivers the best possible performance and flexibility for high-volume, data-intensive analytics and applications across multiple industries. FD operates from 14 offices across Europe, North America and Asia Pacific, including its headquarters in Newry, and employs more than 2,200 people worldwide.
For further information, please visit www.firstderivatives.com and www.kx.com
Chief Executive's Review
This year has seen exciting progress in our ambitious growth plans, with important new contract wins across all our markets, the strengthening of our technology lead and an expansion of our routes to market. Revenue increased by 23% to £186.0m and, following our investment to target new opportunities, adjusted EBITDA increased by 19% to £34.1m.
Our software revenue grew by 27% with the highlight being our continued progress in penetrating our vast addressable market. In FinTech, revenue was up 22% as our strong market presence translated into further market share gains. In MarTech, increasing awareness of the high return on investment that our solutions deliver, combined with the release of additional functionality, drove revenue growth of 24%. In other markets we remain in 'launch mode' with revenue growth of 41% representing a scratch on the surface of the market opportunity.
We reported our 21st consecutive year of double-digit revenue growth in managed services and consulting. This was achieved despite a reallocation of some resource to deliver implementations in our software division and underlines the strong demand for our services, which was reflected in our decision to accelerate graduate recruitment during the year, up by 94% to 390 people.
The combination of our technology lead and large addressable market fuels our confidence in the outlook for FD and the associated continuing investment to unlock this potential. While the technology landscape continues to evolve rapidly, our core strength of ultra-high performance data analytics is an important enabler in areas such as machine learning, industrial IoT and blockchain. Our technology is applicable all the way from the chip, to the edge, to the Cloud and, as data volumes and velocity trend higher and faster, we are excited by the potential to enable the next generation of analytics.
Software
Our proprietary Kx technology leads the market in its ability to capture and analyse vast quantities of data, both real-time and historic. Kx comprises the kdb+ database, with its highly-efficient 500kb footprint, and an enterprise layer providing vital functions such as control and visualisation. Together they provide a platform that enables organisations to meet the most demanding data challenges they face, with an efficient design ensuring it can run on a fraction of the hardware required by competing solutions. These core capabilities, along with the capacity to operate on the chip, edge or cloud delivers a compelling solution for our clients. This was evidenced in the year with our software being deployed for edge computing to public environments such as AWS, Azure and the Google cloud.
Our efficiency also extends to internal development. Since our solutions are based on a common technology platform, we run single R&D and support teams, providing significant economies of scale and reduced development time for new products.
These technology and commercial advantages are being increasingly recognised across industries and creating significant opportunities for the Group. Clients have flexibility to develop bespoke analytics for their particular requirements or can implement applications developed by ourselves or a growing number of OEM partners who use their own domain expertise to provide solutions targeting a particular market.
The market opportunity for our platform and applications is enormous. During the year, working with industry analysts Gartner, we assessed its value, based on annual licenses alone, at least $63 billion in 2018 rising to $83 billion in 2020. The market for professional services associated with these licenses was estimated at a further $23bn for 2018.
We continued to expand our routes to market during the year, in line with our strategy, to help address this opportunity. In addition to direct sales, we offer our software through OEM partners such as Thomson Reuters and via revenue share agreements with companies that have specific domain expertise. We signed agreements with companies such as Quantile, Cobalt, Rx Data Science Inc., AuditComply and Brainwave Bank that entitle us to a share of their revenue in return for the use of Kx to power their solutions. We continue, in conjunction with our strategic financial partners such as the Business Growth Fund (BGF), to identify and work with companies that wish to use Kx to disrupt markets and have a pipeline of exciting opportunities.
FinTech
Revenue from our most mature market, FinTech, increased by 22% to £142.9m. A key driver of growth in FinTech is the imperative for our clients, particularly investment banks, to maximise the value of the data they generate. As a result of our technology's ability to meet this challenge, we are increasingly involved in strategic discussions in which our Kx platform is an enabling technology to achieve desired benefits.
The platform not only provides world leading data analytics capability, but also manages the ingestion, cleansing and normalising of vast quantities of market, reference and client data, removing manual effort and improving accuracy and data accessibility.
Once implemented, we are able to provide a further range of applications that use Kx to help our clients achieve regulatory compliance and deliver operational efficiencies. An example is our surveillance solution, which continues to win market share driven by its cross-asset capabilities, out-of-the-box alerts, flexible configuration and real-time operation. Regulation, including MiFID II, continues to drive contract wins, with planning for the Securities Financing Transactions Regulation (SFTR) and Consolidated Audit Trail (CAT) requirements, among others, driving demand for our applications.
Our liquidity management platform also delivered good growth during the year and has a strong pipeline of opportunities, with its comprehensive analytics capability complementing an efficient trading platform.
Overall, we continue to develop our solutions within FinTech and see strong growth potential from machine learning, with many of our existing clients initiating discussions around the capability of our technology to improve the efficiency of their business.
MarTech
Revenue from MarTech increased by 24% to £38.2m. In this market we leverage the power of Kx to deliver a full B2B account-based marketing platform, with an emphasis on predictive analytics using intent data from internet search. In other words, we help our clients predict and convert their next customer using a range and depth of data that is so vast other technologies cannot compete. The return on investment for our clients is compelling and, despite its short history, we are seeing impressive growth in the platform's subscription revenue.
We continue to develop this platform, branded as MRP Prelytix, particularly to increase its intuitiveness and ability to integrate into a wide range of our clients' systems. During the year we launched an upgraded version of the platform, which has been well received and resulted in an acceleration of growth in the second half of our financial year with good momentum in the current financial year.
While to date the majority of our MarTech clients have been technology companies, MRP Prelytix is applicable to a wide range of industries and we are actively promoting it into new areas. For example, we have signed significant deals with companies operating in the banking, financial services, healthcare, food services and industrial markets.
Looking forward we aim to increase both the functionality and ease of use of our platform to increase its applicability to businesses of all sizes and industries. We believe the macro trends in marketing are playing to our strengths, particularly the desire among organisations to roll out systems across their operations, which our global footprint enables us to achieve. MarTech represents a large addressable market in which we are clearly differentiated.
Other Markets
While FinTech and MarTech are the markets in which we have achieved the greatest commercial progress to date, a key element of our strategy is to establish Kx in other markets which are challenged by data volumes and velocity. During the year, revenue from these other markets increased by 41% to £5.0m, representing encouraging initial traction across a range of high-value opportunities. In particular:
· Sensor analytics - we secured an important contract win with a Fortune 500 engineering solutions company for the use of Kx as the high-performance data historian and analytics engine in the client's fault detection product range. Initial implementations, which started after the year-end and have progressed well, should contribute to our growth in the current year. This is a high-value contract where Kx's superior analytics performance, handling millions of sensor readings per second, enabled us to displace the incumbent solution.
· Automotive - we announced that Aston Martin-Red Bull Racing had selected Kx for analytics on data from its Formula 1 cars. This reinforces the cutting-edge performance of Kx for sensor analytics within automotive, where a wider opportunity to provide analytics for mass produced cars represents a target for the Group.
· Gaming - we announced a contract win with a FTSE 100 gaming company for the use of Kx to provide data analytics for its operations.
These contract wins with high profile companies are helping to establish our presence in these new target markets. Each of them has led to further inbound interest in our capabilities, helping to boost our pipeline and giving us confidence in the outlook for our software business in these markets.
A further key target market is telco, where we consider Kx to be ideally suited to providing operational intelligence. To boost our presence in this market we acquired Telconomics in December 2017, which provides several software products in areas including network development strategy, network planning and network optimisation.
We are also exploring a number of cutting-edge technology themes that have the potential to produce significant commercial returns. These include blockchain, where Kx is embedded in solutions provided by Cobalt DL as it seeks to reduce post-trade risk and cost for financial market participants; dynamic pricing, where Kx can analyse multiple variables in real-time to maximise revenue for gaming companies; and machine learning, where we are involved in a number of projects where Kx is being evaluated as a core element of potential solutions.
Research and development
We have made significant progress in both the performance and the capabilities of our technology stack over the past year, protecting our technology lead and expanding the use of our platform. In particular we:
· Released new versions of our kdb+ database and enterprise platform, which set new benchmarks as measured by the Securities Technology Analysis Center, an independent body. We currently hold 34 of the 41 STAC benchmarks, reinforcing our credentials as the world's best performing time-series database.
· Announced a range of measures to put machine learning capabilities at the heart of our platform, in response to customer demand, including improving access to the power of kdb+ for Python programmers.
· Released, after the year end, an on-demand service for our software for use on-premises as well as in the Cloud. We also announced that the latest version of Kx supports rapid access to unstructured data, broadening our addressable market.
In addition to technical enhancements we have developed our platform to ensure it is optimised for certain use cases such as sensor data analytics and developed analytics which are applicable to a number of the new markets we are targeting. This development work represents a significant element of our ongoing investment to target opportunities in new markets.
Managed Services and Consulting
Our managed services and consulting activities delivered another solid performance, with growth accelerating through the year as a result of our increased recruitment and training efforts. Our activities focus on the support of mission-critical systems within banks, ranging from those developed by our clients in-house to those supplied by a range of third parties such as Murex and Calypso. We have more than 20 years of experience working with these systems, which has enabled us to gain deep insights into our clients' systems and respond rapidly to changing themes and priorities.
Revenue increased by 17% to £74.1m, driven by growth in the U.S. and Europe as our clients sought our assistance with digital transformation projects, complementing our core support activities. Our increasing scale enables us to present teams of diverse experience levels across the landscape of business and technology and to widen the range of services we provide. In particular, over the past year we have successfully introduced proprietary methodologies for testing and migration, which are key areas for banks as they seek to modernise their IT architecture.
A key focus for the Group in recent years has been assisting our clients with their regulatory compliance initiatives. This has now broadened into wider conversations about data governance, involving systems spanning operations, legal and compliance within banks. FD is able to assist through both consulting and software solutions around data quality, streamlined processing and global standardisation of processes.
The quality of our relationships with major banks and the increasingly strategic nature of our engagements is encouraging for future growth prospects. We continue to grow the proportion of our revenues that are performed remotely, from our near-shore centres and particularly our headquarters in Newry.
A selection of our new contract wins during the year included:
· The implementation and support of a third-party system for a New York-based bank, representing one of the largest contracts in our history.
· A major upgrade to a third-party system deployed in the U.S. by a European financial institution.
· The development, implementation and support of robotic process automation (RPA) software for a major client, delivering significant operational efficiencies through the elimination of manual processes.
Our reputation for delivery and client satisfaction, coupled with the repeat nature of the majority of our support engagements with clients, provides a solid revenue base in managed services and consulting. Our growth is driven by our increasing scale and the growing breadth of our capabilities, as referenced in the contract wins above.
Management and Personnel
The Group now employs more than 2,200 people, up from over 1,750 at the same time last year. FD is a dynamic organisation, providing high quality training and development and offering opportunities for rapid career development in some of the most exciting technology markets in the world. As a result, roles within the Group are in high demand and we enjoy strong retention rates.
Our record growth in graduate recruitment is a statement of confidence both in the talent we are able to attract and our growth prospects. We operate a comprehensive training programme for our graduates spanning data science and capital markets, which differentiates us from our competitors and provides the flexibility to direct our people to those areas where they can generate the most value for the Group.
During the year we won two awards, namely Company of the Year at the UK Tech Awards and FinTech Company of the Year at the QCA Awards. In large part this was recognition of the efforts of our staff and I would like to thank all FD employees for the contribution they have made to our success through their hard work, talent and flexibility.
Current Trading and Outlook
The new financial year has started well, with a healthy pipeline of new business opportunities and strong demand generated by our increasing strategic importance to clients. In particular, we continue to capitalise on the investments we have made in recent years in R&D, sales and marketing and expanding our channels to market. The scale of our addressable markets in FinTech, MarTech and elsewhere for our Kx technology provides the potential for the Group to continue growing strongly.
Our solid base of repeat and recurring revenue coupled with the strength of our pipeline provides confidence in our outlook and we remain confident that we are on track to deliver further for shareholders.
Brian Conlon 21 May 2018
Chief Executive Officer
Financial Review
Group revenue increased by 23% to £186.0m (2017: £151.7m), which was predominantly organic. An analysis of revenue is provided in the table below.
2018
2017
Increase
£'000
£'000
Group Revenue
186,042
151,697
23%
FinTech
142,857
117,449
22%
Managed services and consulting
74,130
63,495
17%
Software: Recurring
24,660
20,492
20%
Perpetual licenses
7,016
7,187
-2%
Implementation and support
37,051
26,275
41%
MarTech
38,154
30,668
24%
Software: Recurring
15,454
10,178
52%
Services
22,700
20,490
11%
Other Markets
5,031
3,580
41%
Software: Recurring
1,088
855
27%
Perpetual licenses
270
-
-
Implementation and support
3,673
2,725
35%
Managed services and consulting revenue increased by 17% to £74.1m and represents 40% of Group revenue (2017: 42%). Software revenue increased by 27% to £111.9m, with recurring software revenue increasing by 31% to £41.2m.
Adjusted EBITDA increased by 19% to £34.1m (2017: £28.8m), with an adjusted EBITDA margin of 18% for the period (2017: 19%), a strong performance given the ongoing investment to deliver future growth. We have continued to grow our sales and marketing capability across the Group, in addition to adding domain expertise to assist our move into new markets, building out our software solutions delivery teams and investing in recruitment and training.
The Group continued to invest in R&D to maintain its technology lead, albeit with a greater proportion of spend amortised such that the net benefit to the profit and loss fell during the period, as detailed in the table below.
2018
2017
£'000
£'000
Capitalisation of R&D costs
7,486
7,085
Amortisation of R&D
(6,214)
(4,944)
Net capitalisation
1,272
2,141
Proportion of software revenue
1%
2%
The adjusted profit after tax for the year of £19.5m (2017: £16.1m) represented growth of 21%. The Group's effective tax rate was 16% (2017: 28%), the reduction being predominantly attributable to a tax credit of £1,431k as a result of the revaluation of our U.S. deferred tax balances following the U.S. tax reforms. The adjusted tax rate was 20% (2017: 23%) with the decrease resulting from the reduction in the U.K. main rate of corporation tax and an increase in expenses deductible in the U.S. for tax purposes.
The fully diluted average number of shares in issue increased to 27.0m (2017: 26.2m). This resulted in adjusted fully diluted earnings per share of 72.2p, representing growth of 18% for the year (2017: 61.3p).
The calculation of adjusted profit after tax is detailed below.
2018
2017
£'000
£'000
Reported profit after tax
10,208
9,012
Adjustments for:
Amortisation of acquired intangibles
4,684
4,759
Share-based payment and related costs
2,710
2,056
Acquisition costs and changes in contingent purchase consideration
3,570
2,953
Loss/(gain) on foreign currency translation
1,386
(1,475)
Share of loss of associate
70
24
Tax effect of the above and U.S. tax reform
(3,123)
(1,252)
Adjusted profit after tax
19,505
16,077
Weighted average number of ordinary shares (diluted)
27.0m
26.2m
Adjusted EPS (fully diluted)
72.2p
61.3p
The Group generated £25.3m of cash from operating activities before taxation payments (2017: £30.3m), representing a 74% conversion of adjusted EBITDA (2017: 105%). The factors affecting conversion include the impact of strong trade debtor conversion at the end of the prior year and increased working capital absorption in line with the strong revenue growth in the second half of the year.
The Board has recommended payment of a final dividend of 17.00p per share (2017: 14.00p per share) which, together with the interim dividend of 7.00p per share paid in December 2017, gives a total dividend for the year of 24.00p per share, an increase of 20% compared to the prior year. The final dividend, if approved at the AGM on 27 June 2018, will be paid on 20 July 2018 to those shareholders on the register on 22 June 2018.
Total assets at 28 February 2018 were £254.6m compared to £253.2m at 28 February 2017.
Consolidated statement of comprehensive income
Year ended 28 February 2018
2018
2017
Note
£'000
£'000
Revenue
2
186,042
151,697
Cost of sales
(134,402)
(110,121)
Gross profit
51,640
41,576
Other income
1,382
2,148
Administrative expenses
(38,320)
(31,485)
Operating profit
14,702
12,239
Acquisition costs and changes in contingent purchase consideration
3,570
2,953
Share-based payment and related costs
2,710
2,056
Depreciation and amortisation
5 & 6
8,460
6,750
Amortisation of acquired intangible assets
6
4,684
4,759
Adjusted EBITDA
34,126
28,757
Finance income
1
1
Finance expense
(1,150)
(1,193)
(Loss)/gain on foreign currency translation
(1,386)
1,475
Net finance (costs)/income
(2,535)
283
Share of loss of associate using the equity method, net of tax
(70)
(24)
Profit before taxation
12,097
12,498
Income tax expense
(1,889)
(3,486)
Profit for the year
10,208
9,012
2018
2017
Note
£'000
£'000
Profit for the year
10,208
9,012
Other comprehensive income
Items that will or may be reclassified subsequently to profit or loss
Net exchange (loss)/gain on net investment in foreign subsidiaries
(16,779)
10,836
Net gain/(loss) on hedge of net investment in foreign subsidiaries
1,570
(2,871)
Other comprehensive income for the period, net of tax
(15,209)
7,965
Total comprehensive income for the period attributable to owners of the parent
(5,001)
16,977
Earnings per share
Pence
Pence
Basic
4a
40.4
36.7
Diluted
4a
37.8
34.4
All profits are attributable to the owners of the Company and relate to continuing activities.
Consolidated balance sheet
As at 28 February 2018
2018
2017
Note
£'000
£'000
Assets
Property, plant and equipment
5
7,714
6,628
Intangible assets and goodwill
6
149,744
163,391
Trade and other receivables
6,594
3,630
Investments in equity - associated investees
2,631
1,548
Other financial assets
3,433
3,121
Deferred tax asset
18,353
14,859
Non-current assets
188,469
193,177
Trade and other receivables
53,718
43,738
Cash and cash equivalents
12,365
16,250
Current assets
66,083
59,988
Total assets
254,552
253,165
Equity
Share capital
128
124
Share premium
81,286
72,275
Share option reserve
14,341
10,225
Currency translation adjustment reserve
(6,874)
8,335
Retained earnings
49,218
40,772
Equity attributable to owners of the Company
138,099
131,731
Liabilities
Loans and borrowings
25,205
26,357
Trade and other payables
32,127
35,114
Deferred tax liabilities
9,811
12,932
Contingent deferred consideration
-
3,169
Non-current liabilities
67,143
77,572
Loans and borrowings
3,346
3,404
Trade and other payables
34,070
33,681
Current tax payable
1,195
426
Employee benefits
5,011
5,492
Contingent deferred consideration
5,688
859
Current liabilities
49,310
43,862
Total liabilities
116,453
121,434
Total equity and liabilities
254,552
253,165
Consolidated statement of changes in equity
Year ended 28 February 2018
Share capital
£'000
Share premium
£'000
Share option reserve
£'000
Currency translation adjustment
£'000
Retained earnings
£'000
Total equity
£'000
Balance at 1 March 2017
124
72,275
10,225
8,335
40,772
131,731
Total comprehensive income for the year
Profit for the year
-
-
-
-
10,208
10,208
Other comprehensive income
Net exchange loss on net investment in foreign subsidiaries
-
-
-
(16,779)
-
(16,779)
Net exchange gain on hedge of net investment in foreign subsidiaries
-
-
-
1,570
-
1,570
Total comprehensive income for the year
-
-
-
(15,209)
10,208
(5,001)
Transactions with owners of the Company
Income tax relating to share options
-
-
3,910
-
-
3,910
Exercise of share options
4
8,542
(1,427)
-
-
7,119
Change in fair value of NCI put
-
-
-
-
3,557
3,557
Issue of shares
-
28
-
-
-
28
Issue of shares as purchase consideration
-
441
-
-
-
441
Share based payment charge
-
-
1,586
-
-
1,586
Transfer on forfeit of share options
-
-
47
-
(47)
-
Dividends
-
-
-
-
(5,272)
(5,272)
Balance at 28 February 2018
128
81,286
14,341
(6,874)
49,218
138,099
Consolidated statement of changes in equity
Year ended 28 February 2017
Share capital
£'000
Share premium
£'000
Share option reserve
£'000
Currency translation adjustment
£'000
Retained earnings
£'000
Total equity
£'000
Balance at 1 March 2016
120
65,903
7,217
370
39,654
113,264
Total comprehensive income for the year
Profit for the year
-
-
-
-
9,012
9,012
Other comprehensive income
Net exchange gain on net investment in foreign subsidiaries
-
-
-
10,836
-
10,836
Net exchange loss on hedge of net investment in foreign subsidiaries
-
-
-
(2,871)
-
(2,871)
Total comprehensive income for the year
-
-
-
7,965
9,012
16,977
Transactions with owners of the Company
Income tax relating to share options
-
-
2,561
-
-
2,561
Exercise of share options
4
5,190
(877)
-
-
4,317
Change in fair value of NCI put
-
-
-
-
(3,504)
(3,504)
Issue of shares
-
57
-
-
-
57
Issue of shares as purchase consideration
-
1,125
-
-
-
1,125
Share based payment charge
-
-
1,334
-
-
1,334
Transfer on forfeit of share options
-
-
(10)
-
10
-
Dividends
-
-
-
-
(4,400)
(4,400)
Balance at 28 February 2017
124
72,275
10,225
8,335
40,772
131,731
Consolidated cash flow statement
Year ended 28 February 2018
2018
2017
£'000
£'000
Cash flows from operating activities
Profit for the year
10,208
9,012
Adjustments for:
Net finance costs/(income)
2,535
(283)
Depreciation of property, plant and equipment
2,246
1,806
Amortisation of intangible assets
10,898
9,703
Increase in deferred consideration
2,980
2,125
Equity settled share-based payment transactions
1,586
1,100
Grant income
(1,382)
(2,148)
Share of loss of associate
70
24
Tax expense
1,889
3,486
31,030
24,825
Changes in:
Trade and other receivables
(8,711)
(2,536)
Trade and other payables
2,992
7,970
Cash generated from operating activities
25,311
30,259
Taxes paid
(5,733)
(6,592)
Net cash from operating activities
19,578
23,667
Cash flows from investing activities
Interest received
1
1
Net increase in loans to other investments
(5,805)
-
Acquisition of subsidiaries, net of cash acquired
(114)
-
Acquisition of other investments and associates
(1,865)
(4,269)
Acquisition of property, plant and equipment
(3,443)
(1,800)
Acquisition of intangible assets
(8,246)
(7,656)
Deferred consideration paid
(897)
(1,275)
Net cash used in investing activities
(20,369)
(14,999)
Cash flows from financing activities
Proceeds from issue of share capital
7,119
4,317
Drawdown of new facility
5,300
-
Repayment of borrowings
(3,750)
(3,585)
Payment of finance lease liabilities
(62)
(58)
Interest paid
(1,143)
(1,216)
Dividends paid
(8,310)
(7,253)
Net cash used in financing activities
(846)
(7,795)
Net (decrease)/increase in cash and cash equivalents
(1,637)
873
Cash and cash equivalents at 1 March
16,250
15,100
Effects of exchange rate changes on cash held
(2,248)
277
Cash and cash equivalents at 28 February
12,365
16,250
Notes
1 Basis of preparation
The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group").
The financial information included in this preliminary announcement does not constitute statutory accounts of the Group for the years ended 28 February 2018 or 28 February 2017, but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Both the consolidated financial statements and the Company financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("IFRSs").
2 Operating segments
Business segments
The group has disclosed below certain information on its revenue by geographical location. Details of total revenue can be found in the statement of comprehensive income.
The Group's two revenue streams are separated as follows:
· Consulting activities involves providing services to Capital Markets; and
· Software activities which includes the licence of intellectual property and related services.
Revenue by division
2018
2017
£'000
£'000
Managed services and consulting
74,130
63,495
Software
111,912
88,202
Total
186,042
151,697
Geographical location analysis
Revenues
Non-current assets
2018
2017
2018
2017
£'000
£'000
£'000
£'000
UK
58,054
55,821
34,783
32,155
Rest of Europe
29,824
23,413
13,340
16,620
North America
79,673
60,578
120,529
127,958
Australasia
18,491
11,885
1,464
1,585
Total
186,042
151,697
170,116
178,318
Revenue by industry
2018
2017
£'000
£'000
FinTech
142,857
117,449
MarTech
38,154
30,668
Other
5,031
3,580
Total
186,042
151,697
3 Dividends
2018
2017
£'000
£'000
Final dividend relating to the prior year
3,499
2,918
Interim dividend paid
1,773
1,482
5,272
4,400
The dividends recorded in each financial year represent the final dividend of the preceding financial year and the interim dividend of the current financial year.
The final dividend relating to the prior year amounted to 14.00 (previous year: 12.00) pence per share and the interim dividend paid during the year amounted to 7.00 (previous year: 6.00) pence per share. The cumulative dividend paid during the year amounted to 21.00 (previous year: 18.00) pence per share.
After the respective reporting dates, the following dividends were proposed by the Directors. The dividends have not been provided for and there are no income tax consequences.
2018
2017
£'000
£'000
17.00 pence per ordinary share (2017: 14.00 pence)
4,359
3,482
4 (a) Earnings per ordinary share
Basic
The calculation of basic earnings per share at 28 February 2018 was based on the profit attributable to ordinary shareholders of £10,208k (2017: £9,012k), and a weighted average number of ordinary shares in issue of 25,239k (2017: 24,542k).
2018
2017
Pence per share
Pence per
share
Basic earnings per share
40.4
36.7
Weighted average number of ordinary shares
2018
2017
Number '000
Number '000
Issued ordinary shares at 1 March
24,868
24,009
Effect of share options exercised
367
513
Effect of shares issued as purchase consideration
3
19
Effect of shares issued as remuneration
1
1
Weighted average number of ordinary shares at 28 February
25,239
24,542
Diluted
The calculation of diluted earnings per share at 28 February 2018 was based on the profit attributable to ordinary shareholders of £10,208k (2017: £9,012k) and a weighted average number of ordinary shares after adjustment for the effects of all dilutive potential ordinary shares of 27,017k (2017: 26,212k).
2018
2017
Pence
per share
Pence
per share
Diluted earnings per share
37.8
34.4
Weighted average number of ordinary shares (diluted)
2018
2017
Number '000
Number '000
Weighted average number of ordinary shares (basic)
25,239
24,542
Effect of dilutive share options in issue
1,778
1,670
Weighted average number of ordinary shares (diluted) at 28 February
27,017
26,212
At 28 February 2018 no options (2017: 90,000) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive and 200,000 (2017: 250,000) were excluded as the related conditions had not been satisfied. The average market value of the Group's shares for the purposes of calculating the dilutive effect of share options was based on quoted market prices for the year during which the options were outstanding.
4 (b) Earnings before tax per ordinary share
Earnings before tax per share are based on profit before taxation of £12,097k (2017: £12,498k). The number of shares used in this calculation is consistent with note 4(a) above.
2018
2017
Pence per share
Pence per share
Basic earnings before tax per ordinary share
47.9
50.9
Diluted earnings before tax per ordinary share
44.8
47.7
Reconciliation from earnings per ordinary share to earnings before tax per ordinary share.
2018
2017
Pence per share
Pence per share
Basic earnings per share
40.4
36.7
Impact of taxation charge
7.5
14.2
Basic earnings before tax per share
47.9
50.9
Diluted earnings per share
37.8
34.4
Impact of taxation charge
7.0
13.3
Diluted earnings before tax per share
44.8
47.7
Earnings before tax per share has been presented to facilitate pre-tax comparison returns on comparable investments.
4 (c) Adjusted earnings after tax per ordinary share
Adjusted earnings after tax per share are based on an adjusted profit after taxation of £19,505k (2017: £16,077k). The adjusted profit after tax has been calculated by adjusting for the amortisation of acquired intangibles after tax effect £4,266k (2017: £3,955k), share based payment and related charges after tax effect £2,430k (2017: £1,853k), acquisition costs after tax effect £2,852k (2017: £2,412k), share of loss of associate after tax effect £70k (2017: £24k), and for the loss on foreign currency translation after tax effect £1,110k (2017: gain of £1,179k) and the deferred tax credit following the US Tax Reform of £1,431k. The number of shares used in this calculation is consistent with note 4(a) above.
2018
2017
Pence per share
Pence per share
Adjusted basic earnings after tax per ordinary share
77.3
65.5
Adjusted diluted earnings after tax per ordinary share
72.2
61.3
5 Property, plant and equipment
Leasehold
improvements
£'000
Plant and
equipment
£'000
Office furniture
£'000
Total
£'000
Cost
At 1 March 2017
2,893
10,582
676
14,151
Additions
819
2,426
198
3,443
Acquired in business combinations
-
6
-
6
Exchange adjustments
(90)
(174)
(5)
(269)
At 28 February 2018
3,622
12,840
869
17,331
Depreciation
At 1 March 2017
1,239
5,862
422
7,523
Charge for the year
516
1,585
145
2,246
Exchange adjustments
(59)
(90)
(3)
(152)
At 28 February 2018
1,696
7,357
564
9,617
Leasehold
improvements
£'000
Plant and
equipment
£'000
Office furniture
£'000
Total
£'000
Cost
At 1 March 2016
2,757
8,288
543
11,588
Additions
19
1,666
115
1,800
Exchange adjustments
117
628
18
763
At 28 February 2017
2,893
10,582
676
14,151
Depreciation
At 1 March 2016
868
4,099
320
5,287
Charge for the year
299
1,418
89
1,806
Exchange adjustments
72
345
13
430
At 28 February 2017
1,239
5,862
422
7,523
Carrying amounts
At 1 March 2016
1,889
4,189
223
6,301
At 28 February 2017
1,654
4,720
254
6,628
At 28 February 2018
1,926
5,483
305
7,714
6 Intangible assets and goodwill
Goodwill
£'000
Customer lists
£'000
Acquired
software
£'000
Brand name
£'000
Internally developed software
£'000
Total
£'000
Cost
Balance at 1 March 2017
113,436
13,613
28,567
777
43,578
199,971
Development costs
-
-
-
-
7,486
7,486
Additions
-
-
760
-
-
760
Acquired in business combinations
480
44
182
8
-
714
Exchange adjustments
(10,013)
(1,118)
(2,134)
(47)
229
(13,083)
At 28 February 2018
103,903
12,539
27,375
738
51,293
195,848
Amortisation
Balance at 1 March 2017
-
6,008
13,829
463
16,280
36,580
Amortisation for the year
-
1,344
3,269
71
6,214
10,898
Exchange adjustment
-
(569)
(912)
(29)
136
(1,374)
At 28 February 2018
-
6,783
16,186
505
22,630
46,104
Goodwill
£'000
Customer lists
£'000
Acquired
Software
£'000
Brand name
£'000
Internally developed software
£'000
Total
£'000
Cost
Balance at 1 March 2016
102,603
12,364
24,878
708
35,665
176,218
Development costs
-
-
-
-
7,085
7,085
Additions
-
-
863
-
-
863
Exchange adjustments
10,833
1,249
2,826
69
828
15,805
At 28 February 2017
113,436
13,613
28,567
777
43,578
199,971
Amortisation
Balance at 1 March 2016
-
4,051
9,435
345
11,049
24,880
Amortisation for the year
-
1,475
3,203
81
4,944
9,703
Exchange adjustment
-
482
1,191
37
287
1,997
At 28 February 2017
-
6,008
13,829
463
16,280
36,580
Carrying amounts
At 1 March 2016
102,603
8,313
15,443
363
24,616
151,338
At 28 February 2017
113,436
7,605
14,738
314
27,298
163,391
At 28 February 2018
103,903
5,756
11,189
233
28,663
149,744
7 Report and accounts
Copies of the Annual Report will be available as of 12 June 2018 on the Group's website, www.firstderivatives.com and from the Group's headquarters at 3 Canal Quay, Newry, BT35 6BP.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDFR MMGZKKZKGRZG
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